I wrote about Dubai's real estate collapse in Feb 2009[Link]. I have a Malaysian friend who is there working as a business consultant and 2 months ago he wrote to me that he moved into a big mansion because rentals have fallen by more than 50%. If he loses his job in Dubai, he will just leave and go back to Malaysia. In fact that is what many foreigners working in Dubai have done in the past few months - they just leave without paying for property debt and car loans. Thousands of cars are left at the Dubai airport.
Yesterday, Dubai rattled global markets when it announced that it needed to reschedule its massive debt of US$80B. My instincts tell me that we will get over this one with a deal struck over the weekend. What worries me is actually what the market is not lookcing at manufacturing in Singapore is actually declining[Link] and the Chinese stimulus is masking many problems with its economy.
There is an important lesson in Dubai that is economic illusions can look really convincing. Just 18 months ago, Dubai announced it was about to build an skyscraper half a kilometer tall and a 2 years ago it was looked so impressive with its palm tree island and indoor skiing[Link]. They went on this strategy of growing their economy by attracting foreigners to set up shop and work there. Towards 2007, the large numbers led to a housing bubble and everyone was just flipping property and working as property agents. When the bust came, foreigners simply left and their banks and govt were left to hold the bag.
Really wonder if Durai is still in Dubai?